I have spent 20 years working in nonprofit think tanks, the last 13 as a resident scholar with the Institute for Policy Innovation in Dallas. I also ran the Washington, D.C.-based Council for Affordable Health Insurance for nearly nine years. While I cover a range of political, economic and policy areas, I specialize in health policy. Prior to joining the think tanks, I taught philosophy. I received all three of my degrees—BBA in economics, masters in divinity and Ph.D. in humanities—from Texas universities. I was an ethicist for a medical school's panel reviewing human experimentation. I'm a member of the U.S. Commission on Civil Rights Texas Advisory Committee. For several years I was a political analyst for the USA Radio Network, and I hold a 6th degree black belt in Tae Kwon Do and still teach.

The Most Ominous Sign Yet Health Insurance Premiums Will Explode

Now comes the most ominous sign yet health insurance premiums are going way up: Most health insurers in the individual market have stopped guaranteeing a person’s premiums for a year. And as one commentator quipped: they aren’t doing it because they expect to be lowering people’s premiums.

Traditionally in the individual market, where people buy their own (i.e., non-group) health coverage, applicants sign a contract and the insurance company guarantees that premium for a year. I’m told that about 12 percent of individual applicants would write a check for the year’s premium, rather than being billed monthly.

No more. Health insurers started sending out notices in January informing insurance brokers and agents that the companies will no longer guarantee that premium rate. From now on it’s month to month.

As one benefits company explained:

“After carefully evaluating its individual market and rates, Aetna decided to discontinue its offer of an initial 12-month rate guarantee.

“This change applies to policies with a January 15, 2013 or later effective date, in all states where plans are sold.

“Existing members who are currently in a rate guarantee period will not be affected. The rate guarantee language has been removed from all marketing materials including the state-specific booklets and rate sheets.”

(Update: the day after this column appeared Aetna published a notice saying in part, “While the policies will not have a 12-month rate guarantee, we fully expect the rates to stay the same until December 31, 2013.” While that announcement may alleviate the concerns of some, Aetna is not the only company ending the rate guarantee. And come 2014 all bets are off.)

Thus, an individual buying health insurance for his family thinking he can afford the coverage might be forced to cancel it within a few months because of premium increases.

Why the change? It is all the uncertainty imposed by the misnamed Patient Protection and Affordable Care Act, or ObamaCare. It has thrown so many unknowns into the mix that actuaries don’t know how much to charge.

As one health insurance broker told me, “Any health insurance actuary would be fired for trying to set a premium for a whole year because no one knows how much it’s going to cost.”

Why the uncertainty? Because Democrats crafting ObamaCare ignored virtually every actuarial principle. ObamaCare requires insurers to accept anyone who applies; they can’t charge more for major medical conditions; and they require insurance to cover lots of things that many people wouldn’t choose for themselves.

As retired actuary Mark Litow and I have written elsewhere, health insurance premiums in the individual market will double for some people in some states—and that’s only in the near term.

Now, contrast health insurance with the life insurance market, where people also buy their own policies. There you can buy a policy with a level premium for five or 10 years or more. Of course, one reason that market is so stable is that President Obama hasn’t tried to fix it.

Moreover, these premium fluctuations will wreak havoc on the government’s efforts to provide subsidies to families with incomes up to 400 percent of the federal poverty level. The subsidies cover a portion of the cost of health insurance, up to a maximum out of pocket for the family. The amount of the subsidy is based both on the cost of coverage and income—which will lead to an IRS heyday of snooping, but that’s a topic for another day.

There has been a lot of head scratching over how to deal with the fact that a family’s income can vary significantly within a year, up or down, in ways no one predicted at the beginning of the year. So how does the government determine the correct level of subsidy?

Now add to that mix that premiums can also vary significantly—though only going up, not down.

And if you think this is all someone else’s problem because you have good employer-based coverage, you may be in for a surprise. While the individual market has been relatively small (about 19 million people, according to the Employee Benefit Research Institute) compared to those with employer-based coverage (about 156 million), most honest analysts expect millions of employers to drop coverage and dump their employees into the individual market.

Economic and political uncertainty stifled the economy in Obama’s first four years; but that uncertainty pales when it comes to the uncertainty being experienced in the health insurance market. Millions of Americans will soon discover that health coverage was never so expensive as when Obama decided to make it affordable.

Merrill Matthews is a resident scholar at the Institute for Policy Innovation in Dallas, Texas. Follow at http://twitter.com/MerrillMatthews

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Government run Universal Socialized health care (NHS) gives health care to ALL while cut health care spending by 50%, which means it would cut US Deficits by about $1-Trillion per Year. Given absolute FACT that in countries that have not-for-profit NHS, which is all European countries, Canada, Japan, Israel, Australia, etc. they spend about 9% of GDP on health care while giving health care to all their People.

So NHS gives health care to ALL while cut health care spending by 50% (which means cut Deficits by $1-Trillion)! Why dont we have it then?

Because most of $1-Trillion in SAVINGs that NHS would bring US per year, will come out of the pocket of some very Rich & Powerful people.

So what have these greedy bastards done to stop NHS from coming into existence in this country as it exists in all other developed Nations? They have funded a most right-wing lying machine known to man, aka US Media, from psychos on Talkradio from Rush, to Beck, etc. to such Media outlets as Wall Street Journal, Fox news, CNN, CBS, ABC, etc. to lie and lie to American people against NHS coming into existence in USA.

I used to abhor any mention of socialized medicine. That was before I saw what is happening to our private insurance system. I do not relish the idea of handing the government more control, but at this point there is no other way to avoid a collapse.

Obamacare tried to address universal coverage, but only partly succeeded; and since the Supreme Court took away the stick to enforce it, even fewer will get coverage. Obamacare never even attempted to address costs. Unfortunately costs under it should indeed skyrocket. The reason is that insurance rates have been held down in laissez faire states by permitting insurance companies to not insure the people who actually need health insurance. Now that they will be required to insure them of course rates will increase and the crisis will intensify.

What we need now is what would have, and did, send shivers down my spine only a few years ago. Socialized medicine, lock, stock and barrel; complete with “death committees”. Who ever said that someone’s life is so precious that it must become an economic burden to the point of paralyzing society. Many “medical advances” only marginally extend life while never improving life. At the same time they make huge sums of money for the industry at the cost of the greater society. Economics may be cruel but ignoring it can destroy our society.

Max, there is help for people like you: education. Even if you are fifty you can still enroll in k-12 public education, time to backtrack from that Bong-ology degree ya got and go back to basics. It’s not too late to emerge from your delusional world view.

keep that in mind while you waiting for your friendly local health bureaucrat to authorize a medical procedure you require, or possibly out right reject you. and as you pound sand, hoping that the situation doesn’t deteriorate further, think about how in a free market system, at least you would have the power to spend you health dollars else where.

if socialized medicine is so great in terms of price and care, can you please clue me in to why the wealthy in countries with socialized medicine pretty much all have private policies? can you tell me why the president, congressmen, judges and all federal employees are not giving up their gold plated health insurance policies (taxpayer funded of course!) in lieu of our pseudo-socialized ‘exchanges’?

health insurance prices going through the roof is simply not the cause of government intervention in the market. quite the opposite. the price increases are a direct result of government intervention and regulation. let me give you just a few costly pre-obamacare federal regulations that.

1. by federal government regulation, it is illegal for health care companies to sell their policies across state lines. as a result insurance pools are limited to state populations. the companies themselves must maintain complex corporate structures with costly administrations to be able to operate in more than one state.

2. the federal government mandates what health services an insurance company must provide in *all* of their plans. don’t need maternity benefits? only want catastrophic coverage? too bad. the feds mandate insurance plan must cover x,y and z services, regardless of whether someone needs or wants it. the ability to customize (some might call it al-la carte) a health plan to tailor to an individuals needs and means is illegal by government regulation.

3. the federal government mandates and controls, completely, the number of people who can become doctors in the US each year. that number is far out paced by demand. that number has not gone up in a long, long time, despite the increased demand for health services. this one is simple econ101.

and that is only 3 ways. there are thousands, upon thousands of government regulations pertaining to health care, some good, some bad. i simply fail to see how government making even more expensive, innovation killing regulations is going to make things better

Been going down hill since LBJ got Medicade/Care passed. That instant saw an increase in every little thing related to medical practices and service. This is just the icing on the poison cake and will take us all down.Grab your Hip Waders,its gonna get deeper before it quits raining.

Merrill, I think you’re the one wrong in every possible way, why don’t you do some research about the Healthcare system in the UK, Canada, France and even Mexico and compare it to the one in the USA. If you use facts and not what you want to find or read you will be very impressed.

If everything is so wrong about a NHS, why so many senior americans move to Mexico to receive health care that is affordable? why so many americans go to Mexico to get surgeries or other treatments that are either too expensive in the US or were denied by the insurance company, and they get it in a first class hospital for 1/3 of what it costs here even with insurance. If Max is so wrong how can you explain that???

Well, danmark, I have written on all of those countries except Mexico, plus several others. And I’ve hosted Capitol Hill briefings in Washington with experts from those companies. In fact, danmark, the BBC was trying to get me to Wales to do a television program a couple of years ago (they had me over to do one on welfare about four years ago), but they couldn’t get permission from the hospitals to film inside them. While most of those systems have some good points, they all have significant problem. Including rationing. In fact, I have several newspaper clips I’ve picked up when I was in the countries and use them for presentations. I really like the headline on one: “Am I too old to be treated?” It’s about a senior who couldn’t get a pacemaker because he was 75 or so. Several years ago I was on a bus going from Saint Johns, New Brunswick, to Bangor, Maine, with Canadians who were going to the US to get care they couldn’t get in Canada. I wrote a piece for the Wall Street Journal about the trip. You should be able to find it on the Internet.

But just to answer one of your questions about seniors going to Mexico, you do realize those seniors almost certainly have Medicare, the federal health insurance program. Most seniors who move to Mexico want a lower cost of living so their funds will go further. There is a movement to get Medicare to pay for their care in Mexico, but it ain’t gonna happen.

There certainly a lot of people going to other countries under what we call “medical tourism.” Many of them are uninsured, and they can get a much better price there. But then that’s true for most things in Mexico because incomes are so much lower. That’s also true for most of the medical tourism. People are going to developing countries where health care, and almost everything else, is much cheaper.